Unwieldy Property

by Misha Lepetic

“Whoever lays his hand on me to govern me is a usurper and tyrant, and I declare him my enemy.”
– Proudhon

Back in undergraduate days, when, if it is to be believed, my prose was even more incomprehensible than it is now, I wrote a paper on the economic history of the concept of private property ownership. After 37 pages, and having only reached JS Mill, I bowed out as gracefully as I could, and spent the next week wondering how anyone could be said to own anything at all. And yet, society’s legal and social construction of property ownership continues to be of the utmost importance in setting the course for economic development in general, and urbanization in particular.

In this sense, past commentators have looked at housing as an especially crucial area, since the larger issue of urban migration had already reached a boiling point in Europe by the mid-19^th century. The work of Pierre-Joseph Proudhon is worth singling out in this regard. Originally an unapologetic Anarchist best known for the pithy aphorism “property is theft”, by the end of his life Proudhon had moderated his views considerably. Writing in the posthumously published Théorie de la Propriété,

“…property is the greatest revolutionary force which exists, with an unequaled capacity for setting itself against authority … [The] principal function of private property within the political system will be to act as a counterweight to the power of the State, and by so doing to insure the liberty of the individual.” Proudhon, quoted in Gray, p135

For the later Proudhon, the validity of property is resurrected only “if it is purged and infused with justice” (Gray, p243). Specifically, this right to property would encourage workers to defend themselves against the depredations of the State and its capitalist abettors. In contrast, the propagation of rent-based housing only exacerbated the uncertainty of their situation. It would also go a ways towards preventing slum clearance, which was as ineffective then as it is now. In fact, two decades after Proudhon’s death in 1865, Great Britain’s Royal Commission on the Housing of the Working Classes published a report where the acknowledged that

Rookeries are destroyed, greatly to the sanitary and social benefit of the neighborhood, but no kind of habitation for the poor has been substituted… The consequence of such a proceeding is that the unhoused population crowd into the neighboring streets and courts…and when the new dwellings are complete…the tenants are not the…persons displaced [so that] those whose need is greatest suffer most acutely. (p19-20)

Thus Proudhon’s hope was that, in aggregate, the landowning proletarian class would throw up a legal-materialistic barricade against those who would otherwise bulldoze their neighborhoods and subsequently engage in the kind of property speculations that only further exacerbate income inequality and displacement of urban populations.

We shall return to this thesis, but Proudhon’s views were starkly contradicted, if not ridiculed outright, by Friedrich Engels, who responds in The Housing Question:

The whole conception that the worker should buy his dwelling rests … on the reactionary basic outlook of Proudhonism, … according to which the conditions created by modern large-scale industry are diseased excrescences, and that society must be led violently, i.e., against the trend which it has been following for a hundred years, to a condition in which the old stable handicraft of the individual is the rule, which as a whole is nothing but the idealized restoration of small-scale enterprise, which has been ruined and is still being ruined…Proudhon only forgets that in order to accomplish all this he must first of all put back the clock of world history by a hundred years, and that thereby he would make the present-day workers into just such narrow-minded, crawling, sneaking slaves as their great-grandfathers were.

Since the rise of capital (and the city, as a manifestation of capital) was an irreversible phenomenon (that could only lead to socialism), anything else must be considered an intolerable delay. In Andrew Merrifield’s words, “with a “stake” in the system and mortgaged up to the hilt, some workers become paragons of consenting citizens, stifling revolutionary spirit…the Proudhonist plan, far from bringing the working class any relief, was used directly against it” (p45).

However, Engels graciously refuses to design or suggest any future state. As with so much else of Marxism, he discusses the future redistribution of property with the following breezy statement: “As soon as the proletariat has won political power, such a measure prompted by concern for the common good will be just as easy to carry out as are other expropriations and billetings by the present-day state.” This is not helpful. On the other hand, it has led to at least one wonderfully satirical memoir attempting to describe the lunacy of navigating socialist housing in the worker’s paradise that was the Soviet Union.

It may be surprising, then, to realize that while the debate has sharpened, it has not lost its basic contours. For example, it is instructive to consider Engels’s critique in light of the current financial crisis, where homeowners with mortgages almost permanently under water simultaneously function as the taxpayers backstopping the consequences of banks’ irresponsible lending practices.

On a larger stage of global urbanization, two contemporary commentators have taken over from their 19th-century counterparts. In the Proudhonian corner, Peruvian economist Hernando de Soto argues that “the distinction between property-as-possession and property title [is] the basis for the entrepreneurial generation of wealth. The world’s poor have the former; they need the latter.” That is, the lack of a record-keeping system for titling land to squatters obviates the possibility for much further economic development; to de Soto, this is the principle difference between the success of capitalism in the west, and its failure in many other places. To this effect, his Institute for Liberty and Democracy has been consulting to governments interested in developing these kinds of databases.

But is this enough? That is, given significant enough barriers to formal property, is the formation of capital really impossible? De Soto ends The Mystery of Capital with “but for the moment, to achieve those goals [of development and social justice], capitalism is the only game in town. It is the only system we know that provides us with the tools required to create massive surplus value.” (p228)

It should now be clear where de Soto departs from Proudhon: whereas Proudhon’s workers owned their property as a bulwark against the state, de Soto explicitly relies on the state to provide protection and enforcement of property rights (admittedly, Proudhon’s enforcing entity is unclear to me). It should not be surprising that not only governments, but also companies, have been eager to create these information systems, since this is another step into bringing a large segment of the urban population into contact with opportunities for consumption and debt.

Robert Neuwirth, a journalist whose experience of living in slums around the world led to the publication of Shadow Cities, disagrees that formal titling is necessary to provide the baseline for development. Rather, people need two things: a guarantee, however tacit, that they will not be evicted; and access to politics, where residents can organize themselves into entities that are recognized by governmental institutions (see his Long Now talk, starting at 55:15). As an example, Sultanbeyli is an official sub-municipality of Istanbul, with a popularly elected mayor and services provided by taxes collected within the slum. Remarkably, no one owns title to any of the buildings in the community.

Other projects are similarly engaged: the Favela-Bairro project in Rio de Janeiro seeks to “regularize” slums by mapping them, providing better water and construction options, and, while residents are not issued property titles per se, they have tacit assurance that they will not be evicted. In these cases recognition and enforcement of claims may still be precarious, but the uncertainty seems to have been reduced to a point where dwellers are willing to invest in their communities, and in turn, the government is less keen to clear the slum wholesale.

And yet, both de Soto and Neuwirth are firmly entrenched in the belief that the global slum-city is a warren of entrepreneurship just waiting to erupt. For both, the formation of capital, and therefore prosperity, is as inevitable as socialism was to Marx and Engels. This is in itself a peculiar perspective, attacked recently and with relish by journalist Mike Davis in Planet of Slums. Punching away in Engels’s corner at the efficacy of titling, Davis’s newly empowered property owners simply evolve from slum dwellers to slumlords. In fact, this is capital formation by any other name.

An example of another objection to de Soto’s project concerns “'Informal employment,' [which] by its very definition…is the absence of formal contracts, rights, regulations, and bargaining power” (p181). This brings us to the crux of the matter. What are the economic and social relations of the people living in any of these places? As noble as it may be, what is most striking about an attempt like de Soto’s is that, once again, urban planners and theorists are tacitly concerned primarily with the built environment. This is almost as if to say that, once the built environment has been reinvented, formalized or brought into some kind of bureaucratic receivership, all social relationships will uncomplainingly evolve in a complementary fashion. (And yet, like Engels, Davis is short on recommendations. In fact, it is even worse, as Davis cannot avail himself of Marxism’s “As soon as the proletariat wins everything is gravy” attitude. Unlike Neuwirth’s Shadow Cities, which makes a gritty but optimistic case, Planet of Slums is relentless, a sort of Bleak House for our urban future.)

So, what might informal employment look like in “real life”? In a seminal 2006 article, the New Yorker’s George Packer describes economic relations in Lagos’s informal sector:

What looks like anarchic activity in Lagos is actually governed by a set of informal but ironclad rules. Although the vast majority of people in the city are small-time entrepreneurs, almost no one works for himself. Everyone occupies a place in an economic hierarchy and owes fealty, as well as cash, to the person above him—known as an oga, or master—who, in turn, provides help or protection. Every group of workers—even at the stolen-goods market in the Ijora district—has a union that amounts to an extortion racket. The teen-ager hawking sunglasses in traffic receives the merchandise from a wholesaler, to whom he turns over ninety per cent of his earnings; if he tries to cheat or cut out, his guarantor—an authority figure such as a relative or a man from his home town, known to the vender and the wholesaler alike—has to make up the loss, then hunt down his wayward charge. The patronage system helps the megacity absorb the continual influx of newcomers for whom the formal economy has no use. Wealth accrues not to the most imaginative or industrious but to those who rise up through the chain of patronage. It amounts to a predatory system of obligation, set down in no laws, enforced by implied threat.

It is difficult to square this set of socio-economic relations with de Soto’s embrace of capitalism as “the only system we know that provides us with the tools required to create massive surplus value.” In fact, what Packer describes is a proto-capitalistic system; its currency is fear and debt, not trust and credit. This is emergent economic behavior in its most elemental form, and not some fairy-tale story of a microfinance-funded nail salon. It takes an extraordinary leap of faith to think that titled property rights will displace such a brutish, protean system, or even to assume that somehow these two phenomena are mutually exclusive. In fact, it is much easier to imagine that informal systems of such wicked adaptability could survive alongside, or indeed be nestled in, a formalized system of property rights. It is easy to then further extrapolate that the corrupting influence of money and power generated by the informal system will constantly threaten the formal system. On this topic, de Soto himself recently published a trenchant article entitled “The Destruction of Economic Facts.” Its subject? The undermining of the US property title regime by the banks and the federal government.